I'm one of the cofounders of Crunchyroll, and I handle the business development aspects of the site.

How did you get started?

One of my friends had this idea about a year and a half ago – it was kind of a side hobby that we worked on for a while. It was just something that we thought filled a need at the time.

A need for what?

Bringing content that's not easily accessible in the US using traditional media sources, basically.

So the feeling at the time was that torrents and YouTube weren't doing enough?

Yes. The idea started out as an experiment and it just kept growing. We wanted to make a place for fans of Asian content because we felt they weren't focused enough to do it justice.

I'm assuming your friend is “Shinji”? How old is he? What did he do for a living before Crunchyroll?

Yes, that's him. I can't give out too many personal details… including most of that stuff. He's worked in some internet stuff before, but he did drop out of school.

To maintain the site?

Yeah.

How did he support himself then?

You mean…

If he dropped out of school and he's doing Crunchyroll full-time…

Well, before, when he was working on it and still in school, he had internships and jobs before. I don't really like talking too much about his personal information.

How was the decision made to begin soliciting donations for the website?

Soon after the site launched, after a few months, it started growing too fast. We had some ads on there but it wasn't enough to cover the costs. So we had to either shut it down or solicit donations.

What was the money you made through donations and ad sales used for?

It primarily went to bandwidth and servers. We didn't have any other costs to cover because it was just a part-time nights and weekends hobby project, and most of us had day jobs to support ourselves.

It's been mentioned that Crunchyroll has a full-time staff. When did people start working on the site full-time?

Late 2007 or so. Four of us just decided to leave our jobs and tackle the site full-time. We covered the basics for ourselves while we worked and were talking to investors, and part of what drove us to come on full-time was investor interest.

At that time, was the money coming in from donations – was anyone using that to support themselves?

No. Never.

None of it ever made it into the pockets of any of the staff?

It's always gone back into the infrastructure.

Approximately how much bandwidth does Crunchyroll use each month? How many servers do you have?

I can't give an exact number but it's a lot. Several gigabits per second around peak times. It was costing over $50k/month on bandwidth and $20k/month on servers just to operate.

So was any of that coming out of pocket? Were your donations and ad revenue enough to cover $70,000 a month?

We started the site with around $15,000 – for a few months we were down about $20,000.

When did that turn around?

Around the middle of 2007.

So eventually you were making as much or more than $70,000 a month.

Yes, but not much more.

When are peak times?

Usually in the evenings.

How many servers do you have?

More than 100 now. I can't say that it's cheap or easy to maintain.

Where are they located?

In a location near the San Jose area.

You would claim that yourself and other staff members consider yourselves anime fans, correct?

Yes. In college, we used to watch It with all our friends and dorm mates.

So everyone on the team knew each other in college?

Yeah.

Did you ever feel a cognitive disconnect making money – regardless of what that money was used for – by providing illegal streams of the artists’ work, without a dime of it going back to the artists themselves? You weren't subtitling them yourselves, either, just using external fansubs, and making money by streaming them. Did that ever bother you? Did you ever stop and think “what are we doing?”

I wouldn't say that, but a lot of people don't realize how much work and money it takes to keep a website running. All of the donations went into operating expenses. We put in countless hours every week after work and school to make it a good site. We weren't trying to make a profit, but just keep the site running. We believe the same thing fansubbers do, that by growing the popularity of anime, we are growing the fanbase and the industry. I can't comment directly on it, but I can say how the anime and fansub community even began.

But they weren't charging people… it's against the most basic “code of ethics”, if you will, that fansubbers claim to follow. Even speed subbers who do licensed titles find it wrong. So I don't see how you could equate fansubbing with what you've done here.

Again, we weren't trying to profit but cover costs. It's similar to how fansubbers used to charge for the price of the VHS tape and shipping to distribute their work.

But you didn't fansub anything yourself – you're a third party, providing these streams illegally with no permission from literally anyone involved in their creation. Not the production companies, not the artists, not even the fansubbers. How do you justify that?

The reason fansubbers do their work is because they want it to be distributed and they want people to see their work and we feel we've done so without trying to profit. There have been a few fansubbers who didn't mind what we were doing.

Did you ever attempt to reach out to the fansubbers or the content providers before you started hosting their material? Asking permission beforehand and letting them know exactly what you were doing, how much money was changing hands, before hosting these fansubs?

We didn't – and there are a lot of groups out there and maybe we should've – but logistically it's difficult considering how much stuff our users were uploading.

In a recent interview we did with a fansubber, he mentioned that sites like yours – that charge access to fansubs, Crunchyroll being the largest and most prominent - all of which have a very specific “not for sale or rent” tag on them and were never made to make anyone any money for any reason, are reviled within their community and among anime fans at large. What is your response to that? How does that affect you?

Unfortunately I can't comment on that directly, but we've never restricted access to anyone, and everything on our site isn't really unique to our site. There are very easy, similar alternatives. However I will point out that our content pages do mention the fansubbers, and we offer links to their websites.

Have you ever removed content at the request of a fansubber?

Any time the fansubbers have asked us to remove them, we've always complied.

I spoke with the fansubber that we interviewed prior to this and he mentioned that a prominent “speed subber” had requested that their files be removed from your site and their requests were simply ignored.

I know what you're referring to and we have removed those files, a long time ago. It depends on who they're talking to and hopefully they're not talking to forum moderators because those guys are volunteers. It depends on how they contact us. When they email us, we do something about it.

Who should they contact?

Copyright [at] crunchyroll dot com.

In the future, in partnership with the Japanese companies, have you considered contracting fansubbers to subtitle the legal content you plan on hosting on the site through a legitimate agreement sanctioned by the Japanese companies?

This is a really interesting topic that I can't talk about much because it's uncertain, but we've been reaching out to embrace fansubbers, and we see them as fans who are just hoping to promote their work, but the problem is there's no structure to help them cooperate with the content providers. We think we're close to something, but what we're doing right now is trying to secure all the rights needed to allow the fansubbers to create their works. There's going to be some interesting things coming up, and we need feedback from fansub groups on the different ways we can reward them, whether it be monetary or otherwise.

Your DMCA policy is almost word-for-word identical to the copyright policy on YouTube. The main exception is that YouTube offers copyright holders a Content Verification Program for faster electronic notifications, which is useful for multiple copyright violations. Do you plan to offer a similar system, and if so, when?

We definitely have a similar system on our road map. I couldn't say when exactly. I will say that when we delete something, it stays down. We don't get multiple requests for the same item; if it's gone, it's gone and never comes back.

It's been mentioned you are now reaching out to Japanese companies in the hope of creating a partnership. Which companies are you reaching out to?

I can't say who we've been talking to, but right now everyone's just thinking about how to make digital distribution work.

What has the response been like so far from the companies you have spoken with?

It's a mixed bag, to be honest. There's less resistance than people would imagine.

Have you encountered any resentment or anger from the companies that know what you were doing?

I can't comment on that.

Is your intention to one day ensure that every single video hosted on Crunchyroll is offered legally, with some money going back to the production company and the artist?

We are in revenue sharing agreements with our partners now, and we are pursuing more content partnerships. It is our intention to make sure every content creator gets properly rewarded for their work.

If your intention is to reach out to Japanese companies and pursue these content partnerships, why are there still so many illegal videos hosted on the site? If you're attempting to gain footing within the Japanese industry, wouldn't it be prudent to remove any and all copyrighted content?

Unfortunately I don't think I could comment on that either.

Do you plan on reaching out to R1 companies and working with them in any capacity?

We want to. I can't get into specifics, but I think there will always be a demand for some form of physical media that users would want.

What about dubs?

Yes, dubs are also a big thing that R1 companies do well.

To my understanding, all the content on the site is uploaded by users. The staff doesn't upload anything.

Yes.

There are still so many copyrighted videos on your site – things that have been licensed in America for years. You mentioned that all of the videos are submitted by users – is there any screening process, even one monitored by volunteers? Why is someone allowed still to upload movies – stuff that's been licensed, like The End of Evangelion? Is it entirely reliant on the copyright holders to enforce their copyright, even in extremely obvious cases?

I can see that – I can't comment on exactly how it's filtered now. I can say that we have filters in place to ensure that once something comes down, it's never re-uploaded. Once again I'll say that it's not really unique with regards to users submitting videos – there are plenty of sites out there that don't respect takedown notices like we do.

But none of those other sites were charging for access to the content. That's the chief difference here and it's basically unique to Crunchyroll, with a few exceptions.

We never restricted access to anyone.

You restricted access to the hi-res feeds. You couldn't watch the hi-res feeds without paying $6 to the site. Since your venture capital announcement, that system is now gone, but for more than a year I could pay you $6 to watch a hi-res version of End of Evangelion, even though it's been available on DVD in the US since 2002.

I can't comment directly on that.

YouTube says it is shielded from copyright litigation because it is considered a third-party "online service provider" under America's Digital Millennium Copyright Act. A company that falls under this category is protected, even if its users are sued for copyright violations. However, CrunchyRoll has hosted — and it still hosting — fansubs that are credited to the "CR Fansubs Team." What is the relationship between Crunchyroll and the CR – meaning Crunchyroll - Fansubs Team?

We're not affiliated. CR Fansubs Team is a group of fansubbers that started within our community but we have no say in what they do.

You weren't able to tell them “please don't use our name”, given that it would appear to identify them as an official part of your team?

That's a good point. It's just something where we've always wanted to support our community. I guess that's something that didn't quite occur to us.

Recently you removed the two most popular series on your site, Naruto and Bleach. Those series have been licensed for years now, and yet Crunchyroll continued to host them – and charge people for the privilege of watching the hi-res versions – in 2007 and for the first few months of this year. In your forums, there are pages and pages of people complaining – many suggesting that you will lose a big chunk of your userbase as a result of removing those titles. Do you think there's any truth to that?

Regardless of the situation, we always comply with any takedown requests.

Are you concerned that if your userbase does shrink dramatically after removing the two most popular series, that your site will appear less attractive to other investors or Japanese companies looking to host video there?

I can't comment on that.

When did you start attracting interest from venture capital companies?

Mid to late 2007.

And that was based on your traffic and your Alexa rating?

I believe so, yes.

Did they know what your business model was when they decided to invest?

I can't comment on that.

Why did you continue soliciting donations two weeks after receiving venture capital funding?

The truth is that it was always our intention to take it down after receiving the funding – and we took down ads pretty quickly – but the other part was that we were running a site with so many moving parts, it's been a lot of work and every action has a rippling effect. We've been going nonstop without sleep for months now. As you saw when we removed donations, there was a bit of backlash from the users. So it was a matter of doing it properly before… you guys called us out on it. We needed a way to do it without upsetting people within our community. But the way events unfolded, we just decided to yank it and as you saw there was a backlash from the users.

So after you received the venture capital funding, you left the donation system up in order to not upset the community?

There was a plan in place to phase it out. We just didn't get around to it as things kinda happened.

What is the new funding being used for?

It helps support the bandwidth cost and maintenance costs, and also to help expand our team.

Expanding your team. So now that you have a full-time team, your full-time team is supported by that money? Do you receive a paycheck from Crunchyroll?

Yes.

So your site, which has in the past and to this day maintains, regardless of your current plans, a focus on driving traffic by offering illegal streams of user-submitted – not user-created, mind you - fansubs, including many titles which are available on DVD in the US… you get a paycheck from that site?

I can't comment directly on that, but the money is being used partially to support the team. I can say I took a pay cut from my previous job. I don't think I can say anything else about that.

What can you tell us about your partnership with Gonzo. Did Gonzo approach you or did you approach them?

I can't comment on that, sorry.

Which Gonzo titles do you currently plan on streaming?

The Tower of Druaga series and Blassreiter.

Are any of those exclusive to Crunchyroll?

No.

So you guys are hosting these series as part of Gonzo's plan, but your site is not the focus of it.

That's fair to say.

In the future, do you have any plans to host one or more series – using the proper legal channels and sanctioned by the production company - exclusively? Meaning the only place to see it would be Crunchyroll?

I don't think it's our intention to have exclusives. There are so many alternatives out there that maintaining an exclusive wouldn't change the landscape.
Is there anything more you can tell us about your partnership with Gonzo?

One thing that we will be offering in conjunction with Gonzo that we put together is a non-DRM download system. The model is very interesting to the industry, because it will be different. Hopefully it will also be available to users on the same day it airs in Japan. That also competes with other alternatives out there.

Will you be the only site offering non-DRM downloads of these Gonzo shows?

I don't know, actually. But I can say the model we're trying is unique to us. Unfortunately I can't give you too many details about it yet.

I read all of it and it isn't only the US viewers who benefit from this site!

The interviewer was so agressive.

However, I feel that this shows CR should get permission from external fansubbers and make a new thread displaying fansubbers who allow their content to be viewed and any groups that don't allow it should have their videos removed fromt he site.

I know it's fustrating to download videos through torrents because I can't either unless I want to finish 16 ep dramas when I'm 230 but there are megavideo files that only take 2 - 1.5 hrs to get. I'm a culprit but I usually try and use D-addicts as much as I can, when I can.

I usually watch movies and not dramas here but Ido favourite my dramas here too.

n___n I read it. It isn't long at all, your brains just fry from reading one sentence, lol. Anyways that's interesting. The interviewer is annoying xD. And that's stupid; losing people because of Naruto & Bleach? There are other shows n___n